6 Feb 2018
Licensed Toys Flounder in the UK Market, but Innovation Saves the Day
In the second instalment of his review of the 2018 Toy Show Season, John Baulch, the Publisher of Toy World, turns his attention to the London Toy Fair, the leading industry event for the UK, Europe's largest single national toy market.
Just 10 days after the first toy show of the year – the HKTDC Hong Kong Toys & Games Fair – closed its doors, the UK toy community readied itself for the London Toy Fair, its own domestic toy show. Typically contrary, the UK is now the only European territory to have retained a dedicated toy fair in the first quarter of the year.
For the majority of Europe-based toy manufacturers, distributors and retailers, the gigantic, all-encompassing Nuremberg Toy Fair has long since rendered their domestic events all but irrelevant. Winding back a decade or two, France, Spain and Italy all had domestic toy fairs, all of which have fallen by the wayside, a consequence of the consolidation of the international toy community. Inevitably, this has resulted in fewer suppliers and retailers, many of which operate on a pan-European or, even, a global basis.
As evidenced by the outcome of the Brexit referendum some two years ago, however, the UK perceives itself as set apart from its European counterparts. This mind-set is partly down to the fact that it is, at heart, an island nation and has never been entirely at ease with being bundled with its neighbours across the English Channel.
That aside, the sheer size of the UK market is also a crucial element in the London Toy Fair's continuing success. Even though toy sales in the UK declined by 2.8% in 2017, it remains Europe's largest market, with an overall value of £3.4 billion (US$4.8 billion).
While the UK's performance in 2017 was mildly disappointing, there were a number of mitigating factors, not least of which was the fact that its modest dip came after three years of sustained growth. In fact, 2016 was the UK toy market's best year ever, with 2017 – despite the doom-sounding prognostications – coming in as second-best.
It is also worth bearing in mind that many of the other major European territories also had a challenging 2017. Markets in France, Italy and Spain all shrank, while the best that could be said of Germany – overall, comparatively speaking, the best performer – was that it pretty much stayed where it was.
Neither were all of the UK's commercial tribulations restricted to the toy sector. Indeed, overall consumer confidence took something of a nosedive following the triggering of Article 50, the EU protocol signalling a member country's intent to quit the economic bloc. In addition, a 10% increase in the sales of video-gaming hardware – notably the Nintendo Switch, which had been marketed as a family-friendly system – adversely affected toy sales, especially at the higher price points.
Interestingly, the decrease in sales was largely confined to the final few months of the year. Until the end of September, the UK market was broadly flat. In Q4, though, the market declined by £65 million, with sales of such staples as games, puzzles, art / craft equipment and outdoor toys all falling heavily.
In fact, there were only three weeks in Q4 that enjoyed a trading upturn – the first week of October and the final two weeks of December – while the biggest losses were recorded for weeks 48 and 49, traditionally two of the year's biggest sales periods. In something of a surprise to many toy retailers, there was also a double-digit sales drop during Black Friday Week – the seven-day period beginning Friday 24 November in the UK.
In practice, this means that Christmas came late – very late – for many UK toy retailers. Indeed, some retailers reported that, for 2017, the annual huge upsurge in sales only began in the final four days before Christmas. If this is to be the new normal, rather than merely a one-year blip, it will provide a major logistical challenge for suppliers and retailers.
Traditionally, festive toy sales have been concentrated in a relatively short seven / eight-week period, making it difficult for everyone along the supply chain to ensure that products are where they need to be in order to maximise sales. If that peak sales period has now shrunk from eight weeks to one or two weeks, the challenge will be all the greater.
Breaking the 2017 sales figures down, the majority of toys sold were, once again, in the £10-20 price band, with those under £10 the next best-performers, while items costing £50 or more accounted for only 12% of the market. In a rare bit of good news, sales of toys in the £100+ bracket grew by 24%, largely due to the debut of several particularly well-performing items, most notably Anki's Cozmo robot and Spin Master's Luvabella doll.
Sales of character licensed toys fared less well, declining by 10% year-on-year, as several major summer movies failed to translate box-office success into toy sales. Just 12 months ago, many industry commentators were predicting that the 2017 UK toy market would benefit hugely from a string of summer blockbusters, including Cars 3, Transformers, Spider-Man and Despicable Me 3, while an end-of-year bonus was almost guaranteed once Star Wars: The Last Jedi hit cinemas. In practice, none of these movies lived up to their promise, with Star Wars, in particular, falling a long way short of its pre-launch hype.
Thankfully, though, the slack in the UK market was taken up by innovation, trends and crazes, many of which – including LOL Surprise, Fingerlings and Hatchimals – were recognised at the annual Toy of the Year Awards. Although clearly impressing the judges less, Fidget Spinners, Putty and Slime all made major contributions to the total level of UK toy sales in 2017.
Against such a backdrop then, what did the 2018 show have on offer for the coming 12 months? Well, product-wise, there were a number of impressive launches, all of which will soon be vying for shelf space. There was also one stand that seemed to be lacking the otherwise ubiquitous unicorn product.
There was also a lot of poo, while slime was everywhere, as were new collectible ranges. Indeed, retailers are going to have to considerably expand their display areas if they wish to accommodate even a small percentage of the new items on offer.
Visitor-wise, all of the major UK toy buyers were, of course, all present and correct. Interestingly, a number of the major UK retailers now give the Nuremberg show a miss, while others send only token buying teams.
The number of independent retailers attending, meanwhile, was broadly similar to that seen at previous events. Toymaster, the UK independent retail buying group, had 87 members attending, a slight drop from 2016. As the number of Toymaster members who make it to Nuremberg, however, seldom breaks into double figures, the London Toy Fair remains far and away the best platform for suppliers to beguile British retailers with their latest ranges.
In terms of industry scuttlebutt, the fate of Toys R Us was, of course, the major talking point at the event. The chain, after all, has been a major fixture of the UK retail landscape for more than 30 years, with the prospects of many UK toy suppliers inextricably linked to what happens to the retailer over the coming months.
The closing-down sales in full swing at 26 Toys R Us UK stores are, apparently, going so well that – irony alert – the retailer is having to source new clearance merchandise to keep the stores stocked until their shutters come down for the last time. All the while, the company's buying team remains resolutely upbeat, as indeed it must if it is to have any real hope of inspiring confidence among its suppliers. Said suppliers, meanwhile, remain conspicuously cautious, while keeping a weather eye on day-to-day developments.
For many suppliers, though, it is very much a 'head versus heart' situation. While the difficulty of obtaining credit insurance on Toys R Us orders is clearly a headache, suppliers are still keen to support the retailer and ever-hopeful that it can reinvent itself sufficiently to ensure its success well into the 21st century.
Unlike the US, the UK does have several specialist toy chains that could fill any Toys R Us-shaped gap, with Smyths and The Entertainer the most obvious contenders. Both retailers significantly expanded their presence in the UK toy market in the wake of the demise of a previous retail giant – Woolworths back in 2008. The two also have the benefit of being led by passionate, visionary, hands-on owners with considerable commercial acumen.
According to UK suppliers, however, it is Amazon that has been the main beneficiary of faltering consumer confidence in Toys R Us. As a result, online sales now account for almost a quarter of all toy sales in the UK, with that figure sure to rise in coming years.
As to the London Toy Fair, well its future looks assured and will stay that way as long as the UK toy market remains buoyant and deeply competitive. In one positive sign for the event, several of this year's exhibitors claimed to have closed deals during the course of the show, something of a pleasant surprise in an era where trade shows are largely seen as shop windows rather than opportunities to finalise orders.
It could be that the wheel is turning full circle and we're going back to the time when trade shows were about retailers seeing new lines and getting them on their shelves as soon as possible. Indeed, in an era where flexibility and speed to market is key, an early year trade show provides the perfect opportunity to freshen up product selections and boost takings by stealing a march on competitors.
The London Toy Fair 2018 took place from 23-25 January at Olympia London.
John Baulch is the Publisher of Toy World, the UK's leading toys and games trade publication.
His review of the previous three events in the 2018 Toy Show Season can be accessed by clicking the links below: